Fuzzy Sets and Systems 161 (2010) 1530 – 1542

www.elsevier.com/locate/fss

Fuzzy estimations and system dynamics for improving supply

chains
Francisco Campuzanoa,∗ , Josefa Mulab , David Peidrob
a Technical University of Cartagena (UPCT), Spain
b CIGIP (Research Centre on Production Management and Engineering), Universidad Politécnica de Valencia, Spain

Received 8 July 2009; received in revised form 4 December 2009; accepted 7 December 2009
Available online 16 December 2009

Abstract
In this paper, we evaluate the behavior of fuzzy estimations of demand instead of demand forecasts based on exponential smoothing
in a two-stage, single-item, multi-period supply chain. A system dynamics model with fuzzy estimations of demand has been
constructed for supply chain simulation. Fuzzy numbers are used to model fuzzy demand estimations. With a numerical example,
we show that the bullwhip effect and the amplification of the inventory variance (NSamp) can be effectively reduced.
© 2009 Elsevier B.V. All rights reserved.

Keywords: Fuzzy numbers; Simulation; System dynamics; Supply chain; Bullwhip effect

1. Introduction

The keen competitiveness in today’s economy, plus the effects of globalization, mean that industry must find new ways
to interact and satisfy its customers. In supply chains (SC), manufactures, business intermediaries, transport companies,
suppliers and official organizations collaborate to deliver products quickly and efficiently so that money flows through
the economy. An optimized SC involves improvements in efficiency which may cut inventory requirements, save
transportation costs and other distribution expenses, and improve the time to market.
Forrester [9] analyzed a traditional SC and observed how a small change in a customer’s demand pattern amplified as
it flowed through distribution, production and replenishment processes. At each SC level, this deviation was amplified
upstream to the SC as replenishment orders. This effect is known as the Forrester effect and it is one of the indicators
of inefficient SC management. According to Forrester, this amplification is owing to the problems arising due to there
being non-zero lead times, and also due to the inaccurate forecasts made by the different SC members when faced with
demand variability. Forrester [10] showed that this effect is a result of industrial dynamics, time varying behavior or
industrial companies, and proposes a methodology for the simulation of dynamic models: industrial dynamics, which
is the origin of system dynamics. Industrial dynamics is a quantitative approach which studies the characteristics of
the industrial systems information feedback made up of six flows: information, orders, materials, money, staff and
equipment. In general, the system dynamics’ main objective is to understand the structural causes that bring about the
behavior of a system.

∗ Correspondence to: Francisco Campuzano Bolarín, Dpto. Economá de la Empresa. Universidad Politécnica de Cartagena, Campus Muralla del
Mar, 30261 Cartagena (Murcia), Spain. Tel.: +34 968 32 64 75; fax: +34 968 32 65 80.
E-mail addresses: francisco.campuzano@upct.es (F. Campuzano), fmula@cigip.upv.es (J. Mula), dapeipa@cigip.upv.es (D. Peidro).

0165-0114/$ - see front matter © 2009 Elsevier B.V. All rights reserved.
doi:10.1016/j.fss.2009.12.002
 F. Campuzano et al. / Fuzzy Sets and Systems 161 (2010) 1530 – 1542 1531

Later, Lee et al. [15] identified how the sales related demand distortion due to the Forrester effect amplified even
more because of the following effects which may even show simultaneously in the SC: order lotting, product price
fluctuation, rationing and lack of finished products. The combination of these four elements leads to the amplification
of the variance in product demand. This amplification of demand, which increases the further we are from the end
customer and the more we enter the SC, is called Bullwhip. Lee et al. [16] studied demand information flow and
propose, a theoretical framework for evaluating the effects of systematic information distortion through the SC. The
authors assumed that (1) past demands are not used for forecasting; (2) re-supply is infinite with a fixed lead time;
(3) there is no fixed order cost; and (4) the purchase cost of the product is stationary over time. This idealized situation
is useful as a starting point to analyze the bullwhip effect in a SC.
On the other hand, the demand forecasts considered in a SC planning problem are frequently fuzzy in nature because
of the incompleteness and/or unavailability of the required historical data over the planning horizon, and can be only
obtained subjectively [6,19]. For example in a real decision problem, market demands are usually imprecise over the
planning horizon. Therefore, assigning a set of crisp values for such ambiguous parameters is not appropriate [12,20,22].
We rely on the possibility theory to model this fuzziness which uses possibility distributions to handle this inherent
ambiguous phenomenon in the problem parameters [12,17,18,20,22]. Previously, Carlsson and Fullér [4], based on
the work by Lee et al. [16], proposed a fuzzy version based on a possibility theory of a single-item multiple period
inventory model with non-stationary demand in which demand forecasts are updated from past demands. A SC from
the forest products industry and the markets for fine paper products are adopted as an example. The crisp orders in
this fuzzy proposal are replaced with fuzzy numbers. The authors show how the bullwhip effect could be essentially
reduced. The approach by [4] is adopted as the basis of the present work. We construct a system dynamics model to
simulate a generic single-item, multi-level, multiple period supply chain which was originally proposed in [1]. While
the demand forecasts in the original model are based on exponential smoothing, here fuzzy demand estimations, which
are based on the observed demand in the previous period, are used for the demand information flow.
The aim of this paper is to demonstrate the usefulness and significance of fuzzy estimations based on possibility
distributions instead of using traditional demand forecasting based on time series, such as exponential smoothing,
for SC production planning problems. The novelty of this work is the combination of the system dynamics and the
possibility theory for simulating SC production planning problems.
This paper is organized as follows. Firstly, Section 2 presents the formulation of the models. Section 3 reviews the
measurement of the bullwhip effect. Section 4 evaluates the proposed models with a numerical example. Finally, the
conclusions are provided.

2. Model formulation

The dynamic model used herein is based on system dynamics and includes the variables needed to characterize
the demand management process (inventory levels, replenishment orders, manufacturing, forecasts, etc.) This model
considers capacity constraints, the management of backlogged orders, the fill rate, the measurement of the bullwhip
effect and the inventory costs associated with each level. It can be used to recreate different types of SC management
strategies (different scenarios) to measure the impact of these strategies in the demand management process.
The behavior of the model under study is analyzed by means of a simulation model based on the principles of the
system dynamics methodology. The simulation model proposed by [1] offers an experimental tool which can be used
to evaluate alternative long-term decisions, such as replenishment orders, capacity planning policies, or even inter-
organizational strategies (what-if analysis), since this methodology allows the study of the interdependencies among
all the modeled echelons.
For this work, we used the model created to study the demand management process along a two-stage SC. The main
characteristics of this model are summarized in the following points:
• A two-stage SC system consisting of a customer and a manufacturer, in which the customer orders products only at
its upper stage (manufacturer).
• Manufacturer ships goods immediately upon receiving the order if there is a sufficient amount of on-hand inventory.
We considered a pull planning strategy.
• Orders may be partially fulfilled (each order to be delivered includes current demand and backlogged orders, if any),
and unfulfilled orders are backlogged.
1532 F. Campuzano et al. / Fuzzy Sets and Systems 161 (2010) 1530 – 1542

• Shipped goods arrive with a transit lead time, and they are also delayed because of the information lead time.
• Last stage (manufacturer) receives raw materials from an infinite source and manufactures finished goods under
capacity constraints. In this work, capacity constraints do not influence the size of manufacturing orders since the
manufacturing capacity was set high enough to prevent those constraints from having an impact on the proposed
analysis.
The variables used to create the two-echelon SC causal diagram have been selected by taking the APIOBPCS (automatic
pipeline, inventory and order-based production control system) model as a reference [13]. For a more precise and detailed
explanation of the construction of the model, we referred to [2].

2.1. A two-echelon supply chain model without fuzzy estimations

Two different models have been created to compare the results of having used fuzzy techniques. The first neither
uses demand nor fuzzy orders. The variables used for this model are the following:
(a) End customer demands and demands from one level toward the level situated immediately upstream. The normal
distribution is used for creating the end customer demand signal.
(b) Firm orders (manufacturer).
(c) Backlogged orders (manufacturer).
(d) The inventory on hand (manufacturer).
(e) Demand forecasting (manufacturer). Forecasts have been made by using exponential smoothing.
(f) Inventory position (manufacturer). The inventory position equals the net stock plus on order (orders placed but not
yet received), and net stock equals the on-hand inventory minus the backlog, which is defined by the following
relation [21]:
inventory position = inventory on hand + orders placed but not yet received − backlogged orders (1)
(g) Orders to the manufacturer (manufacturer level), Ot . Both the replenishment and the manufacturing orders are to
be made in accordance with the inventory policy chosen to manage demand. The ordering policy chosen for our
analysis is a generalized order-up-to policy [21]. In any order-up-to policy, the ordering decisions are as follows:
Ot = St − inventory position (2)
The order quantity, Ot , is equal to St reduced for the inventory position (1), where Ot is the ordering decision made
at the end of period t and St is the order-up-to level used in period t. The order-up-to level is updated every period
according to:
St = D̂tL + k ˆ tL (3)

where St is equal to the estimate mean of demand, D̂tL , over L periods ( D̂tL = D̂t · L) increased for the prescribed fill
rate with buffer stocks, tL is an estimation of the standard deviation over L periods, and k is the fill rate factor (safety
factor) which depends on the demand distribution.
(h) Manufacturing lead time (manufacturer).
(i) On-order products (manufacturer).
(j) Manufacturing capacity (manufacturer).
(k) Fill rate (manufacturer).
Fig. 1 shows the causal diagram associated with the formulation of this model.

2.2. A two-echelon supply chain model with fuzzy estimations

For the fuzzy model, the following assumptions were taken into account:
• A single-item, multi-level, multi-period supply chain model is considered where demand is non-stationary over time.
• Past demands are not used for forecasting, only the forecasting of previous periods.
• Re-supply is infinite with a fixed lead time.
 F. Campuzano et al. / Fuzzy Sets and Systems 161 (2010) 1530 – 1542 1533

+ MANUFACTURER
FLOW OF LEVEL
PRODUCTS TO
- WAREHOUSE
+ INVENTORY ON
MANUFACTURING
- + HAND (MANUFACTURER)

+ FACTORY LEAD TIME

-

+
FACTORY
CAPACITY INVENTORY POSITION ORDERS TO BE
+ DELIVERED
(MANUFACTURER )
+
+ +
ORDERS TO + END CUSTOMER -
FACTORY DEMAND
BACKLOGGED
ORDERS
+ DEMAND
FORECASTING
+ (MANUFACTURER)
(MANUFACTURER)

END
CUSTOMER

Fig. 1. The causal loop of a two-echelon SC.

• There is no fixed order cost.

• Excess demand is backlogged.
• Inventory data are considered crisp.
• Fuzzy demand estimations and orders are modeled by fuzzy numbers.
The fuzzy numbers considered are trapezoidal fuzzy numbers defined by à = (a, b, , ) where a is the smallest
possible value, b and  are the main values and  is the largest possible value, according to [4]. It is worth highlighting
that the model has been generally considered to work with trapezoidal fuzzy numbers. Nonetheless, should a = b, then
a triangular fuzzy number will be considered.
All the fuzzy numbers in the model must fulfill the following conditions:  > 0,  > 0, a ≤ b and a > .
Then, we replace a triangular fuzzy number by mean and spread indices that could also be represented by a triangle.
Therefore, these indices could be good to approximate a general fuzzy interval by a triangular one. Nevertheless, in this
proposal, we use the mean of a fuzzy number as a defuzzification method for fuzzy demand estimations and fuzzy orders
in order to interact with crisp inventory and backorders data. Thus, we adopt a neutral attitude in front of uncertainty.
Carlsson and Fullér [3] use the Goetschel–Voxman defuzzification method [11] to define E( Ã), the mean or expected
value of a triangular fuzzy number à = (a, , ) by

−
E( Ã) = a + (4)
6

when à = (a, b, , ) is a trapezoidal fuzzy number, then

a+b −
E( Ã) = + (5)
2 6
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Carlsson and Fullér [3] define the mean square imprecision index of Ã, E 2 ( Ã), as the expected value of the square
deviations between the arithmetic mean and the endpoints of their level sets, i.e. the lower possibility–weighted average
of the squared distance between the left-hand endpoint and the arithmetic mean of the endpoints of their level sets plus
the upper possibility—weighted average of the squared distance between the right-hand endpoint and the arithmetic
mean of the endpoints of their level sets. If à = (a, , ) is a triangular fuzzy number, then
( + )2
E 2 ( Ã) = (6)
24
When à = (a, b, , ) is a trapezoidal fuzzy number, then
 
(b − a) ( + ) 2 ( + )2
E ( Ã) =
2
+ + (7)
2 6 72

The standard deviation of à is defined by


( Ã) = V ar ( Ã) (8)
Other properties of fuzzy numbers can be found in [3]. Besides, the following data and variables are considered:
Data
D(0): initial demand in period 0. Fuzzy value (D(0)a, D(0)b, D(0), D(0)).
S(0): initial inventory in period 0.
d: basic or granted demand, which is constant to avoid negative demand. Fuzzy value (da, db, d, d).
: lead time. It must be >= 0 and integer.
: correlation coefficient of demands €[−1, 1].
2 : variance to calculate demand estimation must be significantly < d.
Variables
O(t): amount of order in period t. Fuzzy value (O(t)a, O(t)b, O(t), O(t)).
D(t): demand in period t. Fuzzy value (D(t)a, D(t)b, D(t), D(t)).
S(t): amount of stock including that in transit after decision O(t) has been made.
B(t): backorders in period t.
u(t): normally, independently and identically distributed with a zero mean and a variance of 2 = 1.
The timing of the events is 365. The amount O(t) to be ordered is decided at the beginning of each period t. The
optimum amount to order, O ∗ (t), is given by the function originally derived by [12], subsequently adopted by [16] and
[3]. The determinist part of O ∗ (t) is calculated as follows:
For t = 1 (the first simulation period)
1 − +2
O ∗ (t)det = (9)
1−
What represents the adjustment of expected demand based on D0 .
Next, the fuzzy value of O ∗ (t) is obtained by multiplying (9) by the fuzzy initial demand as follows:
If O ∗ (t)det < 0, then
O ∗ (t)a = O ∗ (t)det · D(0)a + B(t) (10)
O ∗ (t)b = O ∗ (t)det · D(0)a + B(t) (11)
O ∗ (t) = |O ∗ (t)det | · D(0) (12)
O ∗ (t) = |O ∗ (t)det | · D(0) (13)

If O ∗ (t)det ≥ 0, then
O ∗ (t)a = O ∗ (t)det · D(0)a + B(t) (14)
O ∗ (t)b = O ∗ (t)det · D(0)b + B(t) (15)
 F. Campuzano et al. / Fuzzy Sets and Systems 161 (2010) 1530 – 1542 1535

O ∗ (t) = |O ∗ (t)det | · D(0) (16)

O ∗ (t) = |O ∗ (t)det | · D(0) (17)

The second term of these equations represent the one-for-one replenishment of the inventory demanded in the last
period. Also, we include any pending orders, B(t), only in components a and b because, as they are a determinist value,
the other components ( and ) are considered 0.
For t > 1
(1 − +1 )
O ∗ (t)det = (18)
1−
Next, the fuzzy value of O ∗ (t) is obtained by multiplying (18) by the fuzzy demand, as shown below:
If O ∗ (t)det < 0, then
O ∗ (t)a = O ∗ (t)det · (D(t − 1)a − D(t − 2)a) + D(t − 1)a + B(t) (19)
O ∗ (t)b = O ∗ (t)det · (D(t − 1)b − D(t − 2)b) + D(t − 1)b + B(t) (20)
O ∗ (t) = |O ∗ (t)det | · (D(t − 1) + D(t − 2)) + D(t − 1) (21)
O ∗ (t) = |O ∗ (t)det | · (D(t − 1) + D(t − 2)) + D(t − 1) (22)

If O ∗ (t)det ≥ 0, then
O ∗ (t)a = O ∗ (t)det · (D(t − 1)a − D(t − 2)a) + D(t − 1)a + B(t) (23)
O ∗ (t)b = O ∗ (t)det · (D(t − 1)b − D(t − 2)b) + D(t − 1)b + B(t) (24)
O ∗ (t) = |O ∗ (t)det | · (D(t − 1) + D(t − 2)) + D(t − 1) (25)
O ∗ (t) = |O ∗ (t)det | · (D(t − 1) + D(t − 2)) + D(t − 1) (26)

As the conditions of the previously given fuzzy numbers must be fulfilled,  > 0,  > 0, a ≤ b and a > , then
If O ∗ (t)a < 0 then O ∗ (t)a = 0 else O ∗ (t)a (27)
If O ∗ (t)b < 0 then O ∗ (t)b = 0 else O ∗ (t)b (28)
If O ∗ (t)a < O ∗ (t) then O ∗ (t) = O ∗ (t)a else O ∗ (t) (29)
O ∗ (t) = O ∗ (t) (30)
The mean of O(t) will be calculated with (5).
The products arrive after the lead time, . The available inventory is used to satisfy demand. For the demand signal,
the demand model proposed by [14] is used

D(t) = d + D(t − 1) + u(t) (31)

where D(t) is the demand in period t,  is a constant satisfying −1 <  < 1, and u t is independent and identically
normally distributed with zero mean and variance 2 . The use of the constant d is technical, to avoid negative demand.
Fuzzy demand is represented by trapezoidal fuzzy numbers as follows, where
D(t)a = da + D(t − 1)a + u(t) (32)
D(t)b = db + D(t − 1)b + u(t) (33)
D(t) = d + D(t − 1) + u(t) (34)
D(t) = d + D(t − 1) + u(t) (35)

As the conditions of the previously given fuzzy numbers must be fulfilled,  > 0,  > 0, a ≤ b and a > , then
If D(t)a < 0 then D(t)a = 0 else D(t)a (36)
If D(t)b < 0 then D(t)b = 0 else D(t)b (37)
1536 F. Campuzano et al. / Fuzzy Sets and Systems 161 (2010) 1530 – 1542

If D(t)a < D(t) then D(t) = D(t)a else D(t) (38)

D(t) = D(t) (39)

The mean value and the standard deviation of the fuzzy number will also be obtained. D(t) = (D(t)a, D(t)b, D(t),
D(t)), by applying (5), (7) and (8).
Finally, given the large size of the causal and the Forrester diagrams corresponding to the fuzzy model, their
representation is not considered appropriate, mainly because of the reduced space available which would make it
difficult to understand them.

3. Measuring the bullwhip effect

As mentioned above, the bullwhip effect creates a distortion on the replenishment orders which having been amplified,
propagates upstream to the SC. This amplification upstream to the SC can be measured through the demand variance
along the SC. The variance of a set of data is defined as the square of the standard deviation and is, thus, given by S 2
for the estimation of population variance 2 . Lee et al. [16] suggested the changes of variance in the demand upstream
as the measurement of the bullwhip effect. It is a good measure only when units of flow do not change along the chain,
which does not apply in many logistics cases. To avoid this problem, Chen et al. [5] suggested that the bullwhip effect
should be measured by changing the ratio of 2 / upstream to the SC. But once again, it does not help to avoid the effect
of changing the unit measure. Chen et al. [5] also suggested its measure could be the ratio of either these parameters
between the input and output flows in each activity cell in a SC when only one stage is considered or of these parameters
between the final demand and the first manufacturing stage when the whole supply chain is to be evaluated (40).
2O / O 2O
Bullwhi p = = (40)
2D / D 2D
where O represents orders and D is demand.
On the other hand, Disney and Towill [8] propose that the last measure of the variance ratio can easily be applied to
quantify fluctuations in the net inventory, as shown in (41).
2N S / N S
N S Amp = (41)
2D / D
where O represents orders, NS represents net stock and D is demand.
Next, a summarized solution procedure is presented in order to apply our proposal to solve two echelon production
planning problems in a SC under an uncertain environment:
Step 1: Model construction based on conventional forecasts [13,2].
Step 1.1 Set the parameters of the two-echelon SC model without fuzzy estimations (see Section 4).
Step 2: Model construction based on fuzzy estimations (see Section 2.2).
Step 2.1 Set the parameters of the two-echelon SC model with fuzzy estimations (see Table 1).
Step 3: Simulate the two-echelon SC model without fuzzy estimations.
Step 3.1 Calculate the bullwhip effect.
Step 3.2 Calculate the NSAMP.
Step 3.3 Calculate the inventory on hand.
Step 3.4 Calculate the fill rate.
Step 4: Simulate the two-echelon SC model with fuzzy estimations.
Step 4.1 Calculate the bullwhip effect.
Step 4.2 Calculate the NSAMP.
Step 4.3 Calculate the inventory on hand.
Step 4.4 Calculate the fill rate.
Step 5: Compare the bullwhip effect, NSAMP, inventory on hand and fill rate levels of both models. The decision maker
should select the replenishment model which provides better results to the SC production planning problem
under study.
Step 6: Sensitivity analysis of simulation results for both replenishment orders.
 F. Campuzano et al. / Fuzzy Sets and Systems 161 (2010) 1530 – 1542 1537

4. Numerical example

We now present the results of the simulations done with the two previously proposed models. To go about this,
the Vensim© program was used which is a simulation program for system dynamics. A series of initial values for
some of the variables of the object model under study were established for the simulation. The values assigned to the
corresponding variables were the following.
The parameters for the two-echelon SC model without fuzzy estimations are set as follows:

• Simulation was carried out over a period of 365 days in order to avoid the transitional state and to stabilize the model.
• The initial inventory level for the manufacturer level is set at 15 units.
• The demand pattern follows a normal distribution with a mean of 12 and a standard deviation of 1.
• The manufacturer capacity is set at 160 units a day. It is fixed in order to avoid delays in the production process.
• The manufacturing lead time is set at 1 day.
• The fill rate factor k for each level is analyzed for k = 1.5 and 2. This factor is fixed in order to minimize the bullwhip
effect by raising the fill rate, but in contrast, by also increasing the inventory holding costs [7].
• The forecast adjustment factor = 2, for smooth forecasting,  = 0.5.

The parameters of the two-echelon SC model with fuzzy estimations are presented in Table 1.
The simulation was done with the time horizon of 365 days, which is sufficient for the simulation models to stabilize
and to provide satisfactory results in order to compare fuzzy estimations with the forecasting process with exponential
smoothing and order-up-to-level replenishment orders.
Fig. 2 shows the results of the bullwhip effect on the manufacturing node by applying Eq. (40). As Fig. 2 illustrates,
the fuzzy estimations based model is clearly superior as it generates replenishment orders which are more appropriate
for the end customer’s demand variations, and it achieves a lower bullwhip effect level than the order-up-to level model
for both k = 1.5 and 2.
Fig. 3 represents the NSAMP parameter values as a result of applying Eq. (41). Since the fuzzy estimations based
model generates replenishment orders which adapt better to the end customer’s demand variations, it also obtains lower
fluctuations in the net inventory in the manufacturing node related to this demand. As with the previous case, the results
obtained with the fuzzy estimations based model are far superior if compared with the order-up-to level model with a
fill rate factor (k) equal to 1.5. Besides, the fuzzy estimations based model obtains a much more stable inventory pattern
over time (see Fig. 4).
If we analyze the level of service (Fig. 5), we may conclude that both the fuzzy estimations based model and the
order-up-to-level model obtain practically the same results. Both models obtain service levels of around 90% at the
end of the simulation. Therefore, it is important to highlight that the fuzzy estimations based model may obtain similar
levels of service to the order-up-to-level model, and that it generates a lower bullwhip effect level and lower fluctuations
in the net inventory in relation to the end customer’s demand.
Through example simulations we have illustrated that the fuzzy estimations based model generated more optimal
replenishment orders and it achieved a lower bullwhip effect level an NSAMP without decreasing the service level than
the conventional order-up-to-level model based on exponential smoothing forecasts. Nevertheless, the work is limited
to a two-stage, single item, multi-period SC. Thus, a decision maker could achieve a better decision about what type
of replenishment model to use for a similar SC production planning problem under uncertainty by using our proposal
as a reference simulation model.

Table 1
Parameters for the two-echelon SC model with fuzzy estimations.

Values for time t = 0 Values for t > 0

D(0)a: 12 units D(t)a: 15 units

D(0): 0 units D(t): 10 units
D(0): 0 units D(t): 5 units
: correlation constant of demands €[−1, 1], is set at −0.5
u(t): normally, independently and identically distributed with a zero mean and a variance of 2 = 1
1538 F. Campuzano et al. / Fuzzy Sets and Systems 161 (2010) 1530 – 1542

BULLWHIP MANUFACTURER
60
2 2
2 2 2 2
2 2 2 2 2 2
2
45
2

30 3 3 3
3 3 3 3
2 3 3 3 31
1 31 1 1 1 1 3 1 1 1 1
1 1
31 1
15
3

0 1
0 73 146 219 292 365
Time (Day)
BULLWHIP MANUFACTURER : FUZZY ESTIMATIONS ORDERS MT=1 1 1 1 1 1 1
BULLWHIP MANUFACTURER : ORDER UP TO LEVEL (S) MT=1 k=1,5 2 2 2 2 2 2
BULLWHIP MANUFACTURER : ORDER UP TO LEVEL (S) MT=1 k=2 3 3 3 3 3 3 3

Fig. 2. Bullwhip effect for the manufacturer.

NSAMP MANUFACTURER
400

300
2 2 2 2
2 2 2
2 2 2 2
2
200 2

2
2
3 3 3 3 3 3 3
100 3 3 3 3 3 3
3 3
1 1 1 1 1 1 1 1 1 1 1 1
1 1 1

01
0 73 146 219 292 365
Time (Day)

NSAMP MANUFACTURER : FUZZY ESTIMATIONS ORDERS MT=1 1 1 1 1 1 1

NSAMP MANUFACTURER : ORDER UP TO LEVEL(S) MT=1 k=1,5 2 2 2 2 2 2
NSAMP MANUFACTURER : ORDER UP TO LEVEL(S) MT=1 k=2 3 3 3 3 3 3 3

Fig. 3. NSAMP for the manufacturer.

4.1. Sensitivity analysis for the lead time parameter

A sensitivity analysis was done to observe the effect of the lead time variation, , on the result of the fuzzy estimations
based model. The objective was to analyze the effect of lead time on the bullwhip effect values, NSAMP, the inventory
levels and the customer’s level of service obtained by the model based on fuzzy estimations. Table 2 presents the data
required to do the sensitivity analysis with Vensim ©.
The sensitivity analysis procedure which uses the Vensim© tool works by testing a set of numbers within a certain
range. This range is determined for each parameter with the min value and the max value. This tool samples the
distribution for each specified parameter and the resulting values are used in a simulation. The number of times that
this process will be done is defined by the number of simulations parameter.
Fig. 6 graphically shows the effect of lead time (with values of between 1 and 5) on the bullwhip effect for the
various confidence limits (100%, 95%, 75% and 50%). The exterior uncertainty limits (100%) indicate the maximum
 F. Campuzano et al. / Fuzzy Sets and Systems 161 (2010) 1530 – 1542 1539

Fig. 4. Inventory for the manufacturer.

Fig. 5. Manufacturer fill rate.

Table 2
Sensitivity analysis data of the lead time parameter.

Number of simulations Min. value Max. value Distribution

1000 1 5 VECTOR

values to be possibly obtained in the measurement of the bullwhip effect. The bullwhip effect tends to worsen as the
lead time increases because the system’s response time also worsens. The same occurs with the NSAMP parameter
variation. The net inventory variations in relation to demand (see Fig. 7) are highly affected by lead time. The higher
1540 F. Campuzano et al. / Fuzzy Sets and Systems 161 (2010) 1530 – 1542

Fig. 6. Lead time sensitivity analysis (bullwhip of the manufacturer).

Fig. 7. Lead time sensitivity analysis (NSAMP of the manufacturer).

the lead time value, the greater the net inventory variation. Therefore, worse NSAMP parameter results are obtained. It
is worth noting that an increased lead time may bring about a negative net inventory or a delay in demand, in which
case negative NSAMP parameter results are obtained.
As for inventory levels (see Fig. 8), we may conclude that, as expected, the higher the manufacturing lead time,
the worse the model’s levels. The inventory pattern is always similar. However, the higher the values, the higher the
confidence limit.
Finally in relation to the level of customer service, Fig. 9 illustrates that the effect which supply time has on the
level of service is relatively low. The levels of service obtained for the various confidence intervals are very similar.
The model is capable of obtaining similar service efficiencies for different lead times, be it with larger inventories and
a higher bullwhip effect the greater the lead time is.
 F. Campuzano et al. / Fuzzy Sets and Systems 161 (2010) 1530 – 1542 1541

Fig. 8. Lead time sensitivity analysis (inventory of the manufacturer).

Fig. 9. Lead time sensitivity analysis (fill rate of the manufacturer).

5. Conclusions

In many manufacturing supply chains, production planning decisions have to be made under conditions of uncertainty
in an important parameter such as demand. The bullwhip effect along supply chains can generate the unavailability of
reliable historical data for demand forecasting based on time series, and this makes it extremely difficult to generate
appropriate production plans in supply chains’ dynamic environments. In this paper, we have validated the use of fuzzy
estimations for demand instead of demand forecasts based on exponential smoothing. We have developed a simulation
model for production planning in a two-stage, single-item, multi-period supply chain based on system dynamics. This
model uses fuzzy numbers based on the possibility theory to represent demand and orders. Despite the increased
complexity of the formulation of the fuzzy model, the results improved in terms of the bullwhip effect and the NSAMP.
The study of new versions of the proposed model for the n-stages and n-items of the supply chain is being considered.
1542 F. Campuzano et al. / Fuzzy Sets and Systems 161 (2010) 1530 – 1542

Finally, the testing of fuzzy estimations of demand instead of traditional forecasting in a real world application is the
aim of a forthcoming work.

Acknowledgments

This work has been partly funded by the Spanish Ministry of Science and Technology project: ‘Simulation and
evolutionary computation and fuzzy optimization models of transportation and production planning processes in a
supply chain. Proposal of collaborative planning supported by multi-agent systems. Integration in a decision system.
Applications’ (EVOLUTION) (Ref. DPI2007-65501); and partly by the Vice-Rectorate for Research of the Universidad
Politécnica de Valencia (PAID-05-08/3720) and the Generalitat Valenciana (GVA/ACOMP/2009/169).

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